Market report: Berenberg’s bad write-up for Pearson overshadowed by Provident plunge

The catastrophic share price collapse of Provident Financial meant another bearish write-up on Pearson, itself still in the City’s bad books after its own profit warning, flew under the radar.

Berenberg, among a number of brokers tipping the textbooks and exams group for another heavy share price fall after its 29% profit warning-induced crash in January, today repeated its Sell stance and 490p target price after first-half results earlier this month.

Analyst Sarah Simon questioned whether the company’s efforts to strengthen the balance sheet would be enough amid a tough US college textbooks market.

“Pearson faces substantial structural pressure on its core US higher education unit, and has limited visibility on how these trends will play out,” Simon wrote in a note to clients.

“Cost cutting helps in terms of shoring up profits but could affect the group’s ability to hire talent,” she added.

Simon also warned: “2018 will see a resumption of the decline in the top line, we think.” She slashed her pre-tax profit forecasts by almost 30% for 2019.

The shares shrugged off the bearish comments, edging up 3.5p to 622.5p in line with a stronger FTSE 100, which advanced 45.02 points to 7363.90.

Away from the main talking point, Provident Financial’s huge 1074.01p, or 61%, dive to 680.5p, investors stocked up on Tesco, which rose 5.43p to 182.38p after Kantar industry data showed its sales grew 3% over the summer.

The reaction to a 2% sales rise for Sainsbury’s was not so positive. Its shares fell 4.7p to 232.9p.

Whitbread improved 64.44p, or 1.7%, to 3857.44p after an upgrade from Goldman Sachs. The investment bank removed the Costa Coffee and Premier Inns owner from its Sell list, arguing that the recent share slump has been driven by concerns about the consumer environment.

The copper price hit its highest level since November 2014, spurred on by more unrest at Freeport McMoRan’s Grasberg mine in Indonesia, the world’s second-largest copper mine. It boosted producers such as Kaz Minerals, the FTSE 250 Kazakh copper group spawned from the controversial Kazakhmys. It surged 33p, or 4.5%, to 764.5p.

Provident’s plunge was not the only Neil Woodford-backed stock to suffer.

Among the minnows, Sphere Medical, whose technology analyses gas levels in the blood, crashed 4.7p, more than 80%, to 1.05p after it revealed Woodford and the Welsh government’s Wales Life Sciences Investment Fund are to inject £8 million of funding, take control of the business and delist it from AIM.